Purplebricks is exactly the type of disruptor the real estate industry should be concerned about, writes tech entrepreneur Mike DelPrete.
Last week an article was published on Realestatebusiness.com.au titled, “Disruption is coming but it ain’t Purplebricks.” The sub-headline is attention-grabbing: “The real estate industry is set for a shake-up, but if you think it’s in the form of agencies such as Purplebricks, you are mistaken.”
The headline and the article prompted me to respond, because Purplebricks is absolutely the type of disruption that is coming to the real estate industry.
To be clear, I’m writing from a neutral position. I was previously the head of strategy at Trade Me, New Zealand’s top portal. I have no ties to Purplebricks whatsoever, but I’ve spent the past nine months looking at new models around the world in real estate that are getting traction.
But let’s not confuse a $15 cab ride with a $500,000 home sale.
These are completely different events in someone’s life, occurring at completely different frequencies and at different scales. Disruption is going to look different for each.
You can trace the concept of disruptive innovation back to Clayton Christensen’s seminal book, The Innovator’s Dilemma. The story I remember most clearly is big disruption in the steel industry, and it’s not a big, whiz-bang, transformational change. It’s about making rebar (steel bars) cheaper than the big guys. That’s where disruption starts.
While the jury is still out on the effectiveness of this model and if it really delivers for consumers, it is incorrect to claim that a new model changing the way real estate is transacted at a fraction of the cost isn’t disruptive.
This is what disruption looks like in real estate, and this is why everyone should be paying attention.
It’s not going to be an app to sell your home. It’s not AI, algorithms, or automation. That’s not what disruptive innovation is going to look like in real estate.
Technology might be able to radically change other businesses where the transaction costs are lower and frequency is higher, but it’s unlikely in real estate. Consumers still want a hand to hold and an expert to guide them.
Disruption is going to come from a company that offers a superior experience at a superior price. And when it comes, it will resonate with consumers and gain significant traction in the marketplace.
Purplebricks and the fixed-fee providers in the UK currently account for 5 per cent market share. That’s tens of thousands of transactions every year - a very big deal! If you want evidence of disruption, just read about the UK’s largest estate agency closing 59 branches, or this choice quote, “The cuts come as online-focused rivals such as Purplebricks are building market share…”
If that isn’t disruption, I’m not sure what is.
Which brings me back to my point: don’t dismiss a new entrant because they don’t fit your idea of what a disruptive player looks like. Even if a new model doesn’t look like Uber, it can still shake up the incumbents.
Yes, disruption is coming to real estate. And it will look a lot like Purplebricks.